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What's the Story on Oklahoma State Question 713?

Oklahoma will decide on a $200 million tax hike in a few days, much of which will be paid for by those who can least afford it. Supporters of raising taxes say it is necessary if Oklahoma is to improve its overall healthcare system and fight smoking. The fine print tells us this is not accurate.

Opponents of the tax hike report that less than 1% of the $200 tax hike will go to help Oklahomans quit smoking. American Indian tribes’, it is reported, will receive $50 million of the new tax money, and the rest will be divided up by around a dozen other programs, making this tax hike simply another government money grab.

The legislation swaps the sales tax on cigarettes and replaces it with an increased excise tax. This seemingly simple change will be damaging to cities and counties all over Oklahoma. It means that cities and towns will lose the revenue they currently collect from the sale of tobacco products to the state government. The state government will then get the money and decide which cities and counties get what. This is a formula that could mean those local and city governments without the right connection lose revenue—and means they will certainly lose some control over their funding.

This shift of money from local to state government may have the knock-on effect of local governments raising taxes to cover the lost revenue, causing taxes to spiral still higher.

Also, SQ 713’s tobacco tax could potentially erode Oklahoma’s tax base. Raising Oklahoma’s tobacco tax encourages shoppers to make their purchases in neighboring states, from tax-exempt smokeshops or over the Internet. As a result, Oklahoma will lose that tax revenue, and local businesses will be harmed. Businesses near the border will be particularly hard hit as smokers cross the state line to make their purchases.

SQ 713 also sets the precedent for singling out a particular segment of the population—in this case the smokers—to tax. This goes against the general American ideal of treating everyone equally, and leaves one wondering who they will target next. Drivers? Home owners? Renters? Meat eaters? Vegetable eaters?

In this case, the 55 cent per pack increase is a regressive tax, meaning it hits those who are the least able to afford it the hardest. SQ 713 will not only place the burden of the new tax on low income citizens, but it may also fail to bring in the money the state is expecting to take and spend as consumers cross the state’s borders or turn to the internet to buy cigarettes. If the state does fail to take as much as it is hoping for what will they do? Probably look for another tax to hike.

SQ 713’s $200 million tax hike on Oklahoma’s poorest citizens shows little hope for achieving any of the goals it’s supports claim, sets the wrong precedent for the state, will hurt business, and overall is likely to do the state more harm than good.